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Could the Post Office become the Post Bank?

A broad coalition wants the Post Office to start supplying banking services. Easier said than done...

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Published: 17 Mar 2009

Last Updated: 31 Aug 2010

A number of groups have thrown their weight behind a proposal to create a ‘Post Bank’ within the Post Office network – the idea being that it can step into the breach vacated by our disgraced mega-banks and start providing local banking services, particularly to small businesses. It seems pretty clear that there’s a market for this kind of offering, particularly after the events of last year – but what’s less clear is how it would actually work…

The scheme is being backed by a broad range of groups, from trade unions, to economic think-tanks, to politicians, to pensioners’ groups, to small business organisations. And we can see the attraction. There’s clearly demand there: 3m people in the UK still don’t have a bank account, while small businesses across the country (80% of whom use the Post Office regularly) are still struggling to get access to much-needed finance from high-street lenders. With its 11,500 branches across the UK, the Post Office clearly has the reach to provide the kind of local banking services that its supporters envisage.

Significantly, the Post Office also has a better reputation than most of our big banks, in the light of recent: according to a survey by the CWU union, 93% of people trust the Post Office, while just 54% trust banks. Figures also show that post offices contribute substantially to the local economy. So as a brand, it’s well positioned to step into the gap. And as an added bonus, this move could also place the organisation on a more secure footing at a time when its economic future is under a cloud.

On the other hand, we still don’t really understand how this would work in practice. The campaign talks about a return to the ‘relationship banking abandoned by our biggest banks’ – but as the IoD’s George Cox said on Radio 4 this morning, banking may look simple but it relies heavily on the judgement of those in charge. Presumably we can’t suddenly expect village sub-postmasters to start acting like bank managers, making lending decisions about which small businesses to back? And these days, Post Offices are about the one place where you can guarantee the queue will be longer than it is at your bank.

Still, if there’s a chance of getting more capital to the small businesses and people who need it the most, it has to be worth exploring the idea in more detail...